Charities Act 2022 – Changes to Ex Gratia Payments 

What are the changes?

November 27 2025 sees the final tranche of the Charities Act 2022 come into force. These final changes revolve around charities’ abilities to make ex gratia payments.

Given the 2022 Act gained royal assent in February 2022, this final provision has seen a prolonged delay.

The cause of this was due to concerns surrounding national museums and galleries utilising the introduction of these powers as a mechanism to return cultural assets, which would be otherwise prohibited under existing statute for example the British Museum Act 1963.

Under the current regime trustees are required to seek approval from the Charity Commission prior to making any ex gratia payment. Under the new legislation however trustees may make these subject to defined thresholds, at their discretion.

What are ex gratia payments?

Ex gratia payments are those where trustees believe a moral obligation to make a payment has arisen due to substantial contributions or involvement received from individuals or certain organisations.

They are often deemed to be outside the scope of the governing document for charities as they are not expressly permitted and are based on moral rather than legal obligations.

Input from DCMS – Department for Culture, Media and Sport

The DCMS’ management towards ex gratia payments clarified the introduction of powers does not extend automatically in respect of restitution of objects to an overseas owner, which would still need to be authorised by the Charity Commission as a prerequisite.

This serves as a safety net towards assets currently held in British institutions and will ensure that any desire to return these, is authorised by the Commission.

Further the Act excludes 16 named institutions who will not be able to use the new powers. These are:-

• The Armouries;
• British Library;
• British Museum;
• Imperial War Museum;
• National Gallery;
• Natural History Museum;
• National Museums and Galleries on Merseyside;
• National Portrait Gallery;
• Museum of London;
• Royal Botanic Gardens, Kew;
• The Science Museum;
• Sir John Sloane’s Museum;
• Tate Gallery;
• Victoria and Albert Museum;
• The Wallace Collection.

Limitations / thresholds

Under the new provisions charities are only able to make “small” ex gratia payments.

To calculate these thresholds, a charity’s gross income in its last financial year would need to be factored as following:

• Gross income not exceeding £25,000b - The maximum single payment is £1,000.
• Gross income over £25,000 but not over £250,000 – The maximum single payment is £2,500.
• Gross income over £250,000 but not over £1 million - The maximum single payment is £10,000.
• Gross income over £1 million - The maximum single payment is £20,000.

It is worth noting the above figures are not annual limitations but apply per payment. Therefore, charities could effectively make multiple payments in a year, provided each one does not exceed the given threshold.

The Act also provides a power for trustees to delegate these decisions, however given an ex gratia payment is the application of charity funds for non-charitable purposes, as a principle of good governance trustees should always be aware of the scope and size of these payments. Ultimately responsibility sits with trustees to ensure compliance with charity law.

For any queries relating to ex gratia payments or anything wider surrounding charity law, contact Catherine Rustomji, Ruo Wu, Ellis Pugh.